MODULE :RSK2602
,RSK2602 Exam Study Pack
Contains:
• Exam Questions & Answers
• Comprehensive Exam Summary &
Study Notes
,Questions and answers
Indicate the correct statement with regard to risk and risk management:
1. Risk management should be focused on the upside of possible risk events.
2. A risk event with a high probability of occurring is considered as high risk
event
3. Risk management should be focussed on loss preventing measures.
4. Risk should primarily be view as a negative event
Risk management should be focussed on both the downside and upside of possible
risk event. A risk event with a high probability of occurring is considered a high risk
event. There are two side to risk; the one side tries to prevent a loss or if it occur
minimising is wile the other side takes a risk with the aim of making a profit. Risk
management should be focused on both risks and opportunities. In the light of this,
risk should be viewed from both a positive and negative perspective.
Option contracts are used…..
1. Mainly as anticipatory hedges
2. To hedge against operational risk
3. To hedge against price changes in commodities
4. To finance financial risks
Option contracts are used to hedge against price changes in commodities. Forward
contracts are mainly used as anticipatory hedges. Hedging is used to manage
financial risk and operational risks are not categorised as financial risk. Option
contracts are derivatives, which serve a valuable purpose in providing a means to
manage financial risks, by transferring undesired risk, at a price to another party who
either want to assume the risk or have other offsetting risks.
Derivatives risk arises from…..
1. The failure of customers to pay back loans
2. Hedging activities
3. The decrease in the value of financial portfolios due to market movements
4. The decrease in the value of financial portfolios due to market movements
5. Fluctuations in exchange rates
Derivative risk arises from hedging activities or speculation in the market. Credit risk
arises from the failure of customers to pay back loans. Market risk arises from the
, decrease in the value of financial portfolios due to market movements. Exchange
rate risk arises from fluctuations in exchange rates.
Derivatives aims to over the following types of risk:
a. Prices of commodities
b. Foreign exchange rates
c. Equity
d. Interest rates
1. A, b, c, d
2. A, b, c
3. B, c
4. C, d
Derivatives aim to cover risks associated with prices of commodities, foreign
exchange rates, equity and interest rates.
Credit risk comprises of:
a. Default risk
b. Recovery risk
c. External risk
d. Exposure risk
1. A, b, c
2. A, b, d
3. A, c, d
4. A, b, c, d
Credit risk comprises or default risk, recovery risk and exposure risk.
According to the Basel Committee, 2003, operational risk results from….
a. Any non-financial risk exposure
b. Inadequate and failed internal processes
c. Failures caused by people and systems
d. External events
1. A, b, c, d
2. A, b, c
3. B, c, d
4. A, c
